Low rates combined with extended terms are driving more consumers to purchase a new or used vehicle this year.
Across the board, auto sales are up with trends tracking more borrowers toward their credit union for a loan. CUNA Mutual Group reports a 24.2% spike in credit union auto loan annualized balances for new vehicles, bringing the total outstanding new auto loans at credit unions to $91.6 billion in March. This is up from $74.7 billion last year.
Pre-owned vehicles are not being ignored at credit unions either. CUNA Mutual says that outstanding balances for used cars rose 14.9% in March, which is the fastest rate since November 1999.
Why such a dramatic increase? Experian Automotive says that consumers are opting for a credit union auto loan over any other type as the overall marketplace penetration rate jumped from 15.7% to 16.9% in the first quarter of 2015.
Although the reasons why credit union auto loans are better probably surpasses the reasons we list here, these are a few main points of interest driving the American buying public to a credit union for an auto loan:
Borrowers can always find a good deal. In addition to current rock-bottom rates and reasonable terms, most credit unions will run promotional campaigns aimed at saving the member even more cash. For example, “Air Force FCU’s ($368 million, Dallas, TX) Super Saver” offers rates as low as 1.49%ARP for 48-month, 60-month, 72-month and 84-month terms.
"Super Saver embodies the spirit and foundation of the credit union's core values: integrity, service and excellence," said Danny Sanchez, Air Force FCU's VP of marketing. "We created him to communicate our mission of helping people — our members — but in a fun and engaging platform. Our staff has identified with and embraced him as well, and the whole concept of Super Saver has taken off."
Credit unions give the borrower a second chance to save money. Auto loan refinancing has always been hot for credit unions because borrowers can benefit from deep savings. First Financial Federal Credit Union ($179 million, Wall, NJ) recently re-ran its 2% Auto Loan Challenge because the credit union experienced a surge of members who needed to refinance their high-rate loan. All members have to do is submit proof of their current loan, and then the credit union will try to beat the rate by 2%. According to Jessica Revoir, assistant vice president of marketing, the credit union is saving members thousands in auto loan payments, with many of the refinanced loans coming from auto dealers.
Borrowers are more than a number at a credit union. Oftentimes, borrowers are either swiftly declined for a loan or granted the loan, but at a significantly higher rate due to credit problems. However, at a credit union, lenders will look at the member’s entire financial situation before rendering a decision.
“Many of us will counsel our members and sometimes we help them out when other people really can’t,” said David Lucas, CEO of Stamford Federal Credit Union ($57 million, Stamford, CT) in an article in Westfair Communications. “There have been times where we have paid for people’s medical bills, car repairs, rents or mortgages when they have been short for a month and just couldn’t make the payment.” He adds that because credit unions are member-focused, lenders can maintain a flexible and personal relationship with borrower, far beyond the numbers.
Credit unions offer a variety of specialty services. From GAP insurance to credit union auto location services, members receive more than a loan at their local credit union; they receive an umbrella of coverage. For example, Unitus Community Credit Union ($928 million, Portland, OR) offers Auto Mentors auto buying service. Instead of fighting the dealer, members benefit from consultation, research and advice from an expert buying service that includes no-obligation test-driving and dealer negotiation.